WHAT TO KNOW
HOME LOANS
NAVIGATING THE ROAD AHEAD
Below we can take an in-depth look at the beginning steps of the mortgage process. The more you know about how the process works, the higher your chances are of approval. The process of a home mortgage has many steps, the infographic below provides a simple guide to understanding the progression of your loan from application to closing.
PRE-QUALIFICATION VS. PRE-APPROVAL
Understanding the difference between a pre-qualification and pre-approval can help prevent issues down the road and ensure a smooth and easy transaction. Without proper preparation, buyers could find themselves in a unnecessary stressful mortgage process or even worse, a mortgage denial.
PRE-QUALIFICATION
This is a basic review, often over the phone or online, of a potential borrower’s financial overview. By discussing your current income, assets, debt and credit worthiness; a lender can determine a basis for eligibility and requirements that may be needed for your pre-approval.
Often lenders will offer to “pre-qualify” a buyer with no cost and no credit check. This initial pre-qualification does not guarantee funds but instead is only an estimate of expectation.
PRE-APPROVAL
A pre-approval is generally provided once the borrower has provided supporting documentation. This would include proof of income, assets and will also include obtaining a detailed credit report.
By obtaining a pre-approval the buyer is less likely to have issues arise during the loan process. When looking to purchase a home, Realtors will often want to see a written pre-approval from a lender before moving forward with a client. This ensures that the buyer has met all requirements for that particular home.
WHAT TO GATHER
We have listed some of the items that a lender may request for your pre-approval or loan commitment. Your loan officer can discuss these items and how they may apply to you. Download a pdf of the checklist.
Your most recent* one month’s pay stub(s)
That means:
IF YOU GET PAID:
Every week
Every two weeks
Monthly
YOU NEED TO SEND:
Your last five pay stubs
Your last three pay stubs
Your last pay stub
* Your pay stub(s) cannot be more than one month
old at the time you submit your application
Your most recent two years of your Form W-2 from your employer
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Your W-2 is given to you every year by your employer so you can do your taxes.
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A copy of your W-2 should be attached to your tax return, so you should be able to find it there.
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If you filed electronically, you or your tax preparer should have a copy of your W-2.
Your most recent two years of your tax returns
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Don’t forget to include all pages and schedules. We don’t need copies of your state returns.
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If you own a business, we’ll also need the most recent two years of personal tax returns and any business returns you filed for your company (e.g., 1120, 1120S, Schedule K-1 / 1065).
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If you filed electronically, you can print a copy from your tax software or ask your tax preparer.
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Double check! Do all your returns have your signature? Have you included the most recent two years?
NOTE: If you are SELF-EMPLOYED you may also need to provide your year-to-date profit and loss statements.
Other Income Resources
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Proof of additional income: Items such as social security benefits, child support or alimony (if you wish to use it) may assist when qualifying for your mortgage.
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Social Security: Provide your most recent award letter and 1099 of income. You will also need to show the deposit of this income within your bank statement for the most recent 2 months. Check the assets you have collected to verify this deposit is showing.
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Child Support or Alimony: You may need to provide a divorce decree. Inquire with your mortgage professional on any additional items that may be requested if this income source will be used or if you are responsible for this payment.
Your most recent two months of bank and/or investment statements
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Be sure to copy all pages of your statements (front and back including blank pages that reflect page numbers).
If you don’t receive paper statements, please print your entire online statement. (Don't use screen shots from a mobile phone app.)
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Don’t forget to include all of your accounts (checking, savings and/or investments). Your accounts must show that you have enough money to afford your down payment and closing costs.
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You will need to provide a detailed letter to explain any large deposits or withdrawals, your mortgage professional can work with you on how to provide this.
Note* Large cash deposits may not be accepted the lender, inquire with your loan professional.
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Double check! Are the two months of statements your most recent, do you have all pages?
NOTE: If you will be using GIFT FUNDS, your mortgage professional can advise you on what will be needed.
Identity and income verification
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Copy of Driver's License for each applicant
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Social Security Card or Government-issued ID
Property
Purchases
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Sales Contract signed by all parties
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Proof of earnest money deposit (Copy of canceled check or bank statement reflecting wire transfer)
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Copy of most recent Mortgage Statement & Homeowner Insurance Dec Page for all properties currently owned
Refinances
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Copy of current Homeowner Insurance Declaration Page (include for any additional properties owned)
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Copy of most recent tax bill (Include for any additional properties owned)
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Copy of your most recent Mortgage Statement (Include for any additional properties owned)
THINGS TO KNOW
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Your mortgage professional will go over your credit report with you. If you have opened any new lines of credit that may not reflected on your credit report you will need to provide your most recent statement.
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A letter of explanation will be requested for any derogatories, collections, judgments or credit inquires reported in the last 120 days.
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If you have had a bankruptcy or short sale, the lender may require supporting documentation. Make sure to go over this with your mortgage professional.